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The Balanced Budget Delivers A $500 Child Tax Credit For Approximately 27 Million Families

The Balanced Budget Delivers a $500 Child Tax Credit for Approximately 27 Million Families

MAIN FEATURES OF THE CHILD TAX CREDIT:

Age. Covers children under 17.

Amount per child. $400 in 1998. $500 thereafter.

Income limits. Begins to be phased out for couples making over $110,000 and for one parent families making over $75,000.

"Stacking." Child tax credit will be calculated or "stacked" before the EITC, and will therefore be available for the up to 7.5 million children in working families who have incomes below $30,000 and who were denied the child tax credit under the congressional bills.

For families with more than two children -- Refundability to cover out-of-pocket income and payroll taxes. Because many large families have little income tax liability, but pay significant out-of-pocket payroll taxes, the child tax credit for these families is partially refundable. These families will receive a child credit for their income taxes plus the extent to which their out-of-pocket (employee share) payroll taxes exceed their EITC.

Savings Incentive. Taxpayers will be given the opportunity to contribute $500 each year to an education Individual Retirement Account (IRA). Earnings would accumulate tax-free in the account, and no taxes will be due upon withdrawal for an approved purpose.

A CHILD TAX CREDIT FOR FAMILIES WHO WORK HARD AND PAY TAXES.

13 million children from families with incomes below $30,000 will receive the child tax credit -- up to 7.5 million* more than would have under the Congressional plans. Families makingunder $30,000 like young teachers, police officers, farmers, nurses and others who work hard andplay by the rules will now receive the Child Tax Credit. *Comparison to House passed bill; vs. Senate bill: 5.9 million.

President Clinton worked to ensure that under any final agreement, these young parentswould receive a child tax credit to make it easier for them to raise their children.

Consider a family of four with two small children: the father is a rookie police officer making $23,000, and the mother has chosen to stay at home. Both congressional bills would have denied this family, and millions of others, the child tax credit. Under the final agreement, this family will receive a child tax credit of $675.